Startled traders have just piled up in stock protection at a record pace


(Bloomberg) — Options traders, rocked by the Wall Street turmoil, seized protection from further losses in stocks at the fastest pace on record.

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More than 33 million bearish contracts traded across the board on Friday, the busiest session since data began in 1992. The largest exchange-traded fund that tracked the S&P 500 (ticker SPY) also saw volume soar to a record high after a week of central bank-induced volatility in everything from stocks and bonds to currencies.

“There was clearly fear, because today felt absolutely different,” said Alon Rosin, Oppenheimer & Co’s head of institutional equity derivatives.

The rush for protection came as the S&P 500 stumbled into another weekly decline, fueled by another aggressive Federal Reserve rate hike and warnings that more pain is to come. The S&P 500 briefly dipped below the bear market low on Friday before buyers came forward to hold the index above that key technical level.

The urge to hedge may well be a welcome development for those who have been waiting for a wash out of sentiment to signal a lingering market bottom before diving back. According to the latest Bank of America Corp. survey. money managers have cut equity exposure to record lows amid fears of a recession.

For all of 2022, however, buying dips has proven to be a futile strategy, with each stock bounce subsequently being thwarted. The S&P 500 fell 23% this year and is poised for its worst annual performance since 2008.

During Friday’s trading frenzy, demand for bullish options also increased. Still, call volume only reached its highest since March at 26 million.

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